Dax record, corona crash, Wirecard – the stock market year 2020 had a lot to offer in the first half. But above all, you can learn a lot from it if you internalize some rules.
The stock exchange year 2020 has been more exciting than any other. But it also underlines the importance of some rules for private investors.
1. Exchange psychology is the be-all and end-all of your financial investment. As simple as it sounds, stocks are most attractive when nobody wants them. On the other hand, if everyone is relaxed, one should be careful. This is easy to read on the fear barometer VDAX-New, which shows euphoria and panic
2. The USA set the pace on the stock exchange. When the US Federal Reserve floods the market with money, this money looks for a port – for example, the stock markets. But it is also important to pay attention to moods in the USA. The Fear & Greed Index aggregates whether this is very good or very bad. Everything was possible between 2020 and 2020. The closer to 100, the more euphoric investors are. In March the index was 1.
3. Crash prophets are good and they help investors – but only as contraindicators. When the so-called prophets scream the loudest, getting into stocks is the most interesting. Those who follow them miss out on returns. The most famous crash prophets in Germany have almost completely missed the rally in the Dax for 8000 points. Expensive fun for those who follow doom preachers.
4. A good portfolio should be intelligently weighted. Individual stocks or positions must never unbalance the portfolio. Neither Netflix nor Tesla should be weighted with ten or more percent in a portfolio.
5. German investors love losers. The most traded stocks in 2020 in spring included Wirecard or the automaker, but unfortunately not Zoom, Netflix, Tesla or Amazon. Fallen angels may seem attractive when it comes to valuation, but investors from the USA in particular prefer to buy imagination and the future.
6. Every investor has a personal "bias". That means avoiding certain stocks or having a certain weakness in trading. One does not like technology titles, the other is skeptical of shares at record highs, others still buy fallen angels too often. You have to know this "bias" to outsmart it.
7. The most important factor in the stock market is patience. Nobody will find the perfect entry point, but 2020 shows that even a Dax entry at 11,000 points was only a loss for a few weeks, but after that the success was already evident. Stock market profits are very often pain and suffering – the pain comes first, then the money.
8. Please avoid greed and refrain from wanting to hit the market precisely. One should proceed piece by piece with both hedges and purchases in the market. The mood is also a good seismograph. If everyone is in a positive mood, you increase the cash ratio and reserves. Always imagine on the stock market that you are at an asparagus stall. It is expensive at the beginning of the season and the supply is limited. At the end of the season, many are saturated, the supply is high, prices are falling.
9. Don't listen to hot tips on the stock market and be skeptical about deals that are said to be going well. Too often, these ideas turn out to be flops. Investing, investing, saving shares is work and takes time and patience. But it is worth it because you can build up a fortune.
10. Please always remember the "invisible" Contango. Contango is used for raw materials when prices rise over a longer period of time, as is often the case with crude oil. For stocks, this means dropping an average of seven percent a year for decades. In other words, those who invest in the stock market, with patient wealth accumulation, have an invisible ally in the average return that stocks shed for a long time. A positive attitude towards stocks as a risk investment has been rewarded for decades, and the lower the interest rate in the savings book, the higher the wage.
This contribution does not constitute a recommendation to buy or sell individual shares. No liability is assumed for the correctness of the data.
Daniel Saurenz operates the stock exchange portal Feingold Research. It offers a daily market letter, which you can test free of charge for 14 days. Register at [email protected]. You can also register for training courses there.
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